The goal here today is to give you as much information as possible about the insurances in Germany.
Why is this important? Well, it’s simple:
When you live in Germany, you have to follow German laws. And according to German laws, there are three mandatory insurances that every working person has to pay.
- Health insurance (Private and Public) – Krankenversicherung
- Statutory Pension Insurance – Rentenversicherung
- Unemployment insurance – Arbeitslosenversicherung
The first is Health Insurance that is known as krankenversicherung in Germany. It is compulsory for every person that lives and works there.
To be clear:
There are two types of health insurance namely
- the government-regulated public health insurance scheme (gesetzliche krankenversicherung – GKV)
- private health insurance from a German or international insurance company (private krankenversicherung – PKV)
Public health insurance in Germany
By default, you are always pushed into public health insurance. And the most famous one is TK (Techniker Krankenkasse) or AOK.
It is the largest public health insurance company in Germany with over 10 million policyholders. Most importantly, TK is one of the most common choices for ex-pats.
- To get public health insurance in Germany, your salary must be more than 5,375 euros per month as the Bruto.
In case, you’re not familiar with Bruto, it is your gross salary before all the taxes are deducted
Although Public Health insurance is very expensive compared to Private Health insurance, it has one very important benefit of “Family insurance” which is very useful in terms of cost when there is only one person working in the Family.
Private health insurance in Germany
On the other hand, not everyone can apply for private insurance. The big criteria to be eligible for private health insurance is as follows:
- Perfect health.
- Freelancer
- A permanent employee with a yearly salary greater than 64,500€ in 2021.
Well, any person who is working a fixed job in Germany and earning more than 64,500 euros per year will be eligible for private health insurance.
Which insurance is best for you?
The first thing to consider is your salary. It is one criterion to identify your eligibility.
- If you earn more than 5,375 per month gross or 64,500 euro per year (2021) gross. You are eligible for private health insurance.
But you also have to consider your family situation.
- In case, both husband and wife are working, there is no reason for you to stay back in public health insurance. You are already paying twice into the public health insurance.
Yes, they still have to weigh the benefits and advantages. And disadvantages of moving or not moving into private health insurance. But if both the spouses are working then for them it is a lot of benefit in moving into private health insurance.
If you are eligible for private health insurance you should really research into it. You should know all about private health insurance. What are the benefits of it? am I eligible for it or not.
Public Pension Insurance (Gesetzliche Rentenversicherung)
The second mandatory insurance is the public pension insurance in Germany. The purpose of this insurance is to make sure that you will still have a regular income after you stop working.
As you know
- with public health insurance, you pay 14.5% of your salary.
- But the public pension takes approximately 18.5% of your salary.
- And the employer does contribute 50 percent of public pension insurance.
For example, you can say that your public pension insurance comes up to 1,000 euro. Then 500 euro comes from your account and the employer contributes the other 500 euro.
Is public pension enough?
Now think that you are paying about 1,000 euros. You would be receiving a pension of 1,900 euros.
But this 1,900 euro in no way is sufficient to live in Germany after 30 years considering the inflation and the huge number of costs. In fact, you cannot say it will increase because it will only get worse.
The reason is that the life expectancy of people has increased.
- Now because of good medical facilities and better health care, people are living up to a hundred years of age.
This means the government has to pay the public pension for a longer period: more than 20 years.
- Also, we have fewer kids in Germany.
- The current generation has a lot of foreigners coming into the country. This is mainly to accommodate the jobs that are waiting here in Germany.
What this indirectly means?
- It means that the number of people that have been contributing to the public pension has reduced drastically.
- And in 30 years when you go to your pension there might not be enough contributors.
That’s the reason why there is no way the public pension can increase. However, they have clearly mentioned in the document and you see that there is a possibility that it could decrease.
Hence they also propose that you have to prepare yourself for a private pension as well. You have to make sure that you invest in some private pension so that on top of your public pension you do get some additional private pension as well.
Unemployment insurance - Arbeitslosenversicherung
The third mandatory insurance in Germany is job insurance or unemployment insurance.
Loss of a job can be a stressful time for you and your family. unemployment insurance is here to help. Unemployment insurance will pay you unemployment benefits in case you lose your job. But it will not be valid if you quit yourself.
How much will they pay and how long will they pay for it depends on how long you paid?
This insurance can cost you less than a hundred euros on your payslip. But when you have paid this for about 12 months or one year in Germany, you are eligible for the benefits.
The main benefit of job insurance is that you are paid 60% of your previous net salary after losing your job. The amount is directly deposited into your bank account.
Remember: You cannot avoid these three mandatory insurances as a permanent employee with a fixed job. You have to have these insurances.
How does unemployment insurance work?
The unemployment insurance can cost you less than a hundred euros on your payslip. But when you have paid this for about 12 months or one year in Germany, you are eligible for the benefits.
The main benefit of job insurance is that you are paid 60% of your previous net salary after losing your job. The amount is directly deposited into your bank account.
Add-on for mandatory insurances
As the name suggests, add-on mandatory insurance covers for mandatory insurance offer additional protection, which can help you enhance your basic mandatory insurance policy.
So why we are talking about add-on mandatory insurances as an improvement to your financial condition?
The reason is that when a person gets sick in Germany for a longer duration as an employed person. He is paid 100% of his salary for the first six weeks. And after six weeks the health insurance takes over as in case of long-term sickness.
But a person with a fractured leg or hand has to sit in the hospital for 3 months. And with chronic disease, we see a lot of people spend up to 8 months.
- You have to make sure you insure yourself properly because if the sickness continues for more than six months or one year.
Occupational disability in Germany
In case the doctor certifies that you are not sick but you have to take rest. In such a scenario, the employer is not eligible to give you any salary. It is because he has already done for the first six weeks.
On the other hand, health insurance is also not eligible to pay you any salary because you are no longer sick. It is because they no longer have to treat you. But the doctor has certified that you cannot go back to work and you have to take a rest.
For example, someone has a stroke. It might not be so severe but it could lead to a situation where you have to take a rest for a longer period of time like one or two years.
- For this one or two years, the employer doesn’t pay and the health insurance doesn’t pay.
Remember that you’re not jobless. As you have your job with your employer and you can start work as soon as you recover. Here being jobless debatable and you cannot receive unemployment insurance benefits.
You’re in a situation where you don’t get any kind of income. So that’s when occupational disability insurance comes into the picture. Here this insurance pays you.
For example, there is a 2,000 euro pension which you can get. You are eligible for this pension even without going for a health check-up.
That means you can apply for this insurance. You can take this insurance up to 2,000 euros without any health medical check. You can also insure yourself more like 3,000 euro but you will have to undergo a health check-up to prove that you are healthy for such a huge amount. Mainly what this insurance does is it’s making sure that you are completely insured for the rest of your life.
Non-mandatory Insurances
Liability insurance (Haftpflichtversicherung)
In Germany, you are legally responsible for any damages you or your family caused. Therefore, liability insurance is one of the most important types of non-mandatory insurance in Germany.
Liability insurance protects you financially in cases when you accidentally harm another person or damage his/her property.
In other words, liability insurance covers you if you cause damage or loss to another person. Having liability insurance isn’t mandatory but it is definitely recommended.
How does Liability insurance work?
You cycle around a corner and collide with a pedestrian you didn’t see. The accident is your fault and you have to pay the costs pedestrians incurred because of it. With liability insurance, you’re covered in situations like these. If the pedestrian breaks their leg and has to spend three days in the hospital, your insurance will pay the hospital costs.
It also pays if you damage someone else property. You’re playing football for example instead of scoring a goal you smashed your neighbor’s window. The costs of repairing the window are covered by your liability insurance.
At the latest, you should take out liability insurance when you start renting an apartment. A landlord is also considered to be a third party. Liability insurance also pays for damage you cause in your rented apartment.
House insurance
House insurance is simple. If I own the apartment, the liability is definitely not going to cover everything in the apartment. It belongs to me and doesn’t belong to a third party.
Anybody who owns an apartment or a house has to take housing insurance. And if a person who is living in a rented apartment needs house insurance.
How does house insurance work?
You have furniture in the apartment that belongs to you. You have bought everything new and have the bills for everything. And most importantly the kitchen furniture was purchased by you then it makes a lot of sense. Kitchen furniture is normally expensive and it costs anywhere between five thousand to ten thousand euro.
Suppose one appliance in your kitchen is burned or if all the appliances are destroyed due to a short circuit. The liability is not going to pay for those because those don’t belong to your landlord they belong to you.
Here the house insurance works for you.
On the other side people who own the apartment or house, have to take the house insurance because it covers a lot more than the liability covers for a third party. The house insurance covers you.
If you have an expensive bicycle, you can include in your house insurance and everything that you feel is expensive in your house. You have to make sure you mention it and you get it covered.
Legal insurance (Rechtsschutzversicherung)
The other most important non-mandatory insurance is legal insurance. You might have liability insurance but there are several cases that arise where the party on the other side is not cooperating with you.
A pretty simple example is we talked about this small accident scenario where you are involved in the accident. But the other person is not cooperating and he doesn’t accept the liability insurance or the health insurance asks him but he doesn’t respond.
This could lead to a legal issue. The legal issue is normally divided into four parts. We have a private life, work-life, road-related, and apartment. We have several cases where the landlord refuses to pay back the caution. In Munich, the caution deposit is very expensive. It is like three times your monthly payment. It is approximately 4,000 or 4,500 euros and that is a lot of money.
Some of the property owners seem to be taking advantage of the fact that we have no information on how the legal legalities work. Here they tend to hold back the caution deposit and we assume maybe it is our fault and we tend to ignore it. But the concept is not that the landlord is supposed to ask you to pay for the repairs that have to be done in the house.
Here the caution is four thousand euro and the entire repairs in the house might cost one hundred or two hundred euros. So in this case, if he doesn’t listen to you, you will have to send him a legal notice.
Life insurance (Lebensversicherung)
We also have accidental insurance.
We are not talking about the default accidental insurance which is there for everybody due to health insurance. This only helps you whether you’re going to the office and coming back from the office. There is small accidental insurance that takes care of bringing you to the hospital charges. But we are talking about private accidental insurance.
It takes care of all the things that happen in your personal time from Thursday evening to Monday morning. During this time if something happens and you have to be brought to the hospital. If you do not have accidental insurance, these costs have to be borne by you. Some of the companies provide private accidental insurance.
The most important one which we have heard about this in India as well: the LIC or the life insurance.
Many of you know about it and also if you haven’t taken it in Germany. It’s a good thing to have because especially in families where we have a single earning person. And the whole family is dependent upon this person’s salary. But if something were to happen to this person then you need some kind of compensation.
The compensation helps you cover private credit or personal loans from the bank. It’s very good to at least cover that amount in the life insurance for three hundred or four hundred thousand. So that when something happens to you, your family is not approached for that money.